EXECUTIVE SUMMARY

This project aims at understanding the supply chain practices followed by the fast
fashion collection manufacturing company Zara, Spain. It takes into consideration
the profile of the company and the characteristics of fashion industry and on what
factors does it future growth depend upon.
Then the report moves on to concrete on the various key factors of success of Zara.
The time cycle of the products of Zara, what it offers to its customers including the
customer segmentation has been considered. Then the logistics and supply chain
mechanism has been considered at length. These include the methodology used to
react to recent changes rather than predicting it, production methods, distribution
methods and use of information technology at various stages of supply chain.
Finally, it is discussed whether the competitive advantage that Zara has is sustainable
or not. The various learning from Zara’s supply chain management has also been
jotted down In the end.
ZARA’S PROFILE
Zara is the flagship chain store of Inditex Group owned by Spanish tycoon Amancio
Ortega. Zara is the most internationalized of Inditex’s chains. The group is
headquartered in A Coruna, Spain, where the first Zara store opened in 1975. As of
August 2009, there are more than 1,500 Zara stores around the world.
It is claimed that Zara needs just two weeks to develop a new product and get it to
stores, compared with a six-month industry average, and launches around 10,000
new designs each year. Zara has resisted the industry-wide trend towards
transferring fast fashion production to low-cost countries. While it spent little on ads,
it spent heavily on stores.
Zara is a vertically integrated retailer. Unlike similar apparel retailers, Zara controls
most of the steps on the supply-chain: It designs, produces, and distributes itself.
The business system that had resulted was particularly distinctive in that Zara
manufactured its most fashion- sensitive products internally. Zara did not produce
"classics", clothes that would always be in style. In fact, the company intended its
clothes to have fairly short life spans, both within stores and in customers' closets.
FASHION INDUSTRY – OVERVIEW
The fashion industry is characterized as a chain, in which profits derived from
“unique combinations of high-value research, design, sales, marketing, and financial
services that allow retailers, branded marketers, and branded manufacturers to act
as strategic brokers in linking overseas factories” with markets.
There are various types of fashion and each type has its own characteristics. e.g. Fast
fashion is one of them which are used to describe clothing collections which are
based on the most recent fashion trends, whereas classical fashion on the other
hand describes those clothing collections which are evergreen. The recent trends are
generally the ones that are presented in various “fashion week” organized around
the globe.
Fashion is a thing which constantly changes. Its value depreciates slowly after the
time is gone. In the time period when the product has just become “out-of-fashion”
till its value becomes zero, the product is generally sold on sale. As a result, this
industry tends to extract as much profit as possible when the product is in fashion
then give “heavy” discounts.

FASHION INDUSTRY – GROWTH DRIVERS

There are many factors on which the future growth of fashion industry depends:-

1. World GDP – The GDP growth will determine the buying capacity of people and
also the condition of other industries on which fashion industry depends.
2. Policies – As many countries are plunged into recession, the countries are
changing the import and export policies. These policies will have a major
impact on the industry growth as most part of fashion accessories are exported
to other countries.
3. Development of logistics – Logistics is the backbone of fashion industry. As the
better the logistics, faster the product hits the market, cheaper the cost, better
it is for the customers and so for the companies.
4. Growth of retail chains – Most of the companies do not have their exclusive
showroom only. They depend a lot on multi-branded showrooms across the
world to sell their products. Hence the growth and stability of the retail chains
will go on to improve the condition of fashion industry.
5. Development in IT – Speed of the process, the customer’s order from ordering
the raw material to the final selling of the product, greatly depends on the
technology used in the system. E.g. use of RFID, clipped tags, faster printers,
better communication channels etc. Better the technology available and used
the better the responsiveness of the fashion industry towards customers
demands.
6. Others – There are various skills (of people or computer) which influence a lot
the fashion industry such as forecasting etc.
ZARA’S CUSTOMER AND PRODUCT OFFER

Zara’s Customer Segment

LOW COST FASHION FOR THE 16 TO 24 YEAR OLDS

LOW COST FASHION

Get it approximately right Respond to what customers want – create a

demand chain

Eliminate creative design Copy trendy fashion fast

Fast-response supply chain including design Create a store experience

Finalise design knowing material supply Create a network/brand

constraint

Optimise the supply process for speed and

cost